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Canadian jobs growth to be modest, Conference Board says

Job creation for the short-term remains stalled in this country but there are signs of improvement on the horizon, according to the Conference Board of Canada.

"We've really seen flat employment growth over the last six months and a much weaker domestic economy in general," says Pedro Antunes, director, National and Provincial Forecast, the Conference Board of Canada in Ottawa. "We had a strong recovery in consumer and government spending and that's what was driving growth in 2009, 2010 and through the first part of 2011. We were ahead of the curve in terms of recovery.

Canadian employment figures were virtually unchanged last month. In February, the economy lost 2,800 jobs entirely offsetting the marginal increase posted in January. Despite this, the unemployment rate fell 0.2 percentage points to 7.4 per cent as fewer people were searching for work.

"Now we're settling in and waiting for the rest of the world to catch up and when I say the rest of the world, it really is around the U.S. economy," says Antunes.

But better performance in the American economy has been emerging of late and Antunes says he hopes the uptick will translate into less tentative hiring going forward.

Diana Petramala, economist, TD Economics in Toronto, agrees job creation in Canada has "basically stalled" over the last six months.

"We think a lot of this was driven by souring business sentiment. The time of labour weakness really started when global markets were becoming uneasy about European debt," she explains. "Now that European leaders have taken action to contain the financial consequences of that debt, business sentiment should improve and we have seen some improvement. That will likely coincide with a slight pickup in hiring going forward."

That said TD expects hiring in Canada to remain modest.

"We expect employment growth to mirror that of the labour force, so we expect the unemployment rate to remain stuck within the 7.4 per cent to 7.6 per cent range over the next year," she adds.

Youth suffering most from high unemployment

Perhaps more alarmingly though is the fact that youth employment fell for the fifth consecutive month (down 27,000), according to the Board's tally, pushing the unemployment rate for this age group to 14.7 per cent. Moreover, TD Economics suggests the economic recovery has been "almost non-existent" for Canadians aged from 15 to 24.

"Canada's youth population has not been benefitting as much as other age groups in the employment market," Petramala continues. "This mirrors what happened in the last recession: during periods of soft labour market conditions, youth labour tends to be affected more adversely than others."

Industries where youth are more likely to be employed — like retail, construction and some areas of manufacturing -- also tend to be hit hard by economic downturns.

"It's not surprising they've been disproportionately affected during the recession and as well, coming out of recovery, employment recovery tends to lag behind the rest of the market," she adds. "Youth employment will pickup ... but we're also seeing an additional hurdle where older people are staying in the market for longer."

Every other segment of the labour market has caught up to pre-recession levels, Antunes says, noting employment among people aged 55 or more has risen by 24,000 in the same period.

"Youth was easily gaining employment before the recession in some jobs that weren't necessarily demanding in terms of skills or high tech. Those were the first jobs to go during the recession and it hasn't recovered," he says. "Having said that, there's a lot of potential in the economy for youth. In fact, when we compare these employment levels to the 1980s and 1990s, things have gotten a lot better."

That might be tough for some to believe at this juncture.

"We'll continue to see a situation where labour markets get tighter and though we've seen a relapse over the last six months, we will see the Baby Boomer cohort continue to exit the labour market and this will provide opportunity for youth with skills," he says. "Hopefully, youth have been taking the time to upgrade their skills during this recession. The jobs will come, there's no doubt."

Provincial deficits to weigh on jobs... especially for women

Canada's most populous province, the employment situation in Ontario remains an unpredictable one. Fundamentally, the province is still undergoing adjustment from the manufacturing sector.

"We have seen some very good auto sales in the U.S. and that has been driving the production export figures for manufacturing. That's good news for a sector that's been undergoing restructuring for the last eight years," Antunes says. "The sectors that will drive employment overall though will be private service sectors and this is a typical pattern we've seen over the last decade. We'll see more weakness in Ontario than in other places in public hiring."

Antunes refers to austerity measures being imposed by the federal and provincial governments that will equal a loss of jobs in the public sector. That'll impact Ontario more considering the federal government's influence in the Ottawa area.

"It's not just in Ontario. When you look at highly indebted provinces, for instance Quebec and New Brunswick, it's true the unemployment weakness we've seen in the last six months has stemmed from the public sector," Petramala remarks. "In particular, education, healthcare and social assistance have been quite weak. Typically, these are areas that more women than men tend to be employed."

In the private sector, there's intent to invest 6.2 per cent more in construction (both residential and non-residential) and machinery in 2012, according to Statistics Canada's survey of investment intentions, Antunes notes. High commodity prices continue to spur investment in the mining and oil and gas extraction industry. Investment there is expected to rise 17.7 per cent, accounting for one-fifth of the total increase.

"If you talk about gender issues outside of the public service certainly the recession was harder on men than women because the two industries that were hardest hit were construction and manufacturing," he says. "Those two industries have been doing a bit better.

"What's interesting when you look at private investment overall, we've seen investment come back to pre-recession levels across most sectors. Investment is what drives future productivities and future employment."